Actually, 40 Years Of Data Show The MBA Effectively Does Nothing -- It Has No Impact

If Josh Kaufman had gone to business school, he probably would have graduated this year with an MBA from Harvard or Stanford.

But Kaufman, a 28-year-old entrepreneur who had worked as an assistant brand manager for Procter & Gamble, thinks business school is pretty much a waste of time and money.

MBA programs, he says firmly, have become so expensive that students "must effectively mortgage their lives" and take on "a crippling burden of debt" to get what is "mostly a worthless piece of paper." Kaufman believes that MBA programs "teach many worthless, outdated, even outright damaging concepts and practices." And if that's not bad enough, he insists that an MBA won't guarantee anyone a high-paying job, let alone turn a person into a skilled manager or leader.

Founder of PersonalMBA.com and the author of the forthcoming "The Personal MBA," Kaufman is a passionate advocate for what he calls self-education. Instead of paying up to $350,000 in tuition and forgone earnings to go to Harvard, Stanford or Wharton, Kaufman says a better way to learn business is to open the pages of classic business texts and learn on your own.

Through the economic meltdown, of course, MBA bashing reached new heights. Eager to find a scapegoat, critics happily assigned blame to business schools for teaching MBAs the merits of financial manipulation that led to a global financial crisis.

40 years of data show MBA degrees don't lead to higher salaries or company positons

Much of Kaufman's argument rests on a study published eight years ago by Stanford Business School professor Jeffrey Pfeffer of Stanford University and Christina T. Fong of the University of Washington. The pair analyzed 40 years of data and studies and came up with a provocative and startling conclusion: "There is scant evidence that the MBA credential, particularly from non-elite schools, or the grades earned in business courses are related to either salary or the attainment of higher level positions in organizations."

As Kaufman quotes the study, he is almost giddy. "It's the first and only systematic study I've seen," he says. "They crunched 40 years of data on job rates, positions, and salaries. They asked whether getting an MBA provides benefits or not. Their answer was no. It does effectively nothing. It had no impact."

"There's the general impression that getting an MBA puts you on a pedestal in terms of your knowledge and experience and what you're able to contribute to a business. But I was able to walk into a boardroom and hold my own [having been self-taught] with people who had graduated from Stanford and Wharton. It was very exciting."

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“Unless you want to be a consultant or an I-banker, it’s hard to understand why this is a better use of time and money than actual experience"

Seth Godin also inspired Kaufman to spit upon MBAs. In March of 2005, Harvard rescinded the admission of 119 applicants who had hacked their way into the school's computer systems to find out if they had been accepted before being officially notified. Kaufman read about the incident on a favorite blog by best-selling business author Seth Godin who had an unusual view of the incident.

Harvard, Godin thought, was giving these applicants a gift: HBS was essentially returning $150,000 in tuition and two years of their lives. "Unless you want to be a consultant or an I-banker (where a top MBA is nothing but a screen for admission)," Godin wrote, "it's hard for me to understand why this is a better use of time and money than actual experience combined with a dedicated reading of 30 or 40 books."

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Kaufman turned his disapproval of MBA programs into a business

After reading Godin's take, a light went off. "That was the moment when I realized that this project I had been doing on my own for quite a while could be useful to a ton of other people, " says Kaufman, a self-proclaimed "independent business educator." Within' days, he drafted a list of recommended books that would form the basis of a self-taught "Personal MBA," put it up on the web and, suddenly, a flood of users flocked to it. Then, Kaufman crafted a "manifesto" to explain the idea to newcomers and to urge them to "skip business school" and "educate yourself."

A serious and committed MBA basher was born.

He left P&G in 2008, moved just outside Fort Collins, Colorado, and went into business, doing one-on-one coaching and consulting for $1,000 a month and creating a 12-week online crash course delivered live and on video for $997. His website, PersonalMBA.com, features what he considers to be the 99 best business books that lay out all the basic principles of business and a community in which to discuss the ideas with others.

Kaufman's first book, to be published in early December by Penguin's Portfolio imprint, makes his anti-MBA case and distills the business essentials from the thousands of books he has read. Kaufman claims he is already pulling down what a freshly minted Harvard MBA would make upon joining Boston Consulting Group or McKinsey & Co. "Without any of the debt," he quickly adds.

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Getting an elite MBA is like buying yourself a $150,000 interview

To Kaufman's way of thinking, the only reason someone should go to a business school for an MBA is if they want to work for a prestige consulting firm, investment bank, or a Fortune 50 company which he says uses elite business schools as a filter to decide who to interview. "If you want to work in an industry that uses the MBA as a screen, you are effectively buying yourself a $150,000 interview," he contends. "If you want to do anything else in business, if you want to start your own company, get a job in another field, you don't have to have an MBA. It's better if you don't because of the debt."

And even for consulting, investment banking or Fortune 50 positions, Kaufman says, the benefit is ephemeral. "The effect (of the degree) is strongest immediately after graduation," he says, "then largely wears out within three to five years. After that, you're on your own. Hiring managers no longer care so much about where you went to school. They care more about what you've accomplished since then."

That's a perspective, of course, that many dispute. "If that view were true, why on earth would we continue to get nearly 10 applications for every slot, given that more than half of our MBA graduates do not do one of those three things," counters Richard Lyons, dean of the Haas School of Business at the University of California in Berkeley. "Strange, isn't it, that the recruiters continue to value these people as well, particularly outside these three areas?"

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More than 190,000 people every year are getting a degree they don't need

Nonetheless, Kaufman estimates that all of these firms combined, from Goldman Sachs to McKinsey & Co., probably hire no more than 5,000 to 10,000 MBAs a year out of the more than 200,000 people who are getting MBAs around the world. The other 190,000 to 195,000 are getting MBAs they don't really need. "For pretty much everyone else, it's a waste and a very bad investment," he insists. ""I would probably be the biggest fan of education programs if they cost less and taught more practical skills. You can get a better education faster and cheaper if you do it yourself."

"Look," he says with some hyperbole, "going to Harvard all told can cost you about $350,000. That is mortgage level debt. Put that through an amortization schedule at a 6.8% rate of interest. It's a $2,200 monthly payment over 30 years. You are spending $821,000 when you account for the interest. The cost is enormous."

Kaufman says he was recently in a New York airport, waiting for a plane to fly him home to Colorado, when he found himself standing next to a young woman who had just graduated from Harvard Business School. "I asked her what she was doing next and she said she was going to Los Angeles to be a consultant," he says. "It was clear she wasn't happy about it. She told me she went to Harvard so she could work in international development and the World Bank told her she had to get a master's. When she applied again, the bank said it had already met its quota for American hires. She had no illusions. The consulting job became her only option because she had to pay back her loans. I think that's really, really sad. If she wanted to work in international development, there are thousands of ways to do that. If she were free of that financial burden, she would have tons of options. Now she is forced to do something she doesn't want to do and won't like just to pay back the debt."

Not surprisingly, Kaufman gets his share of hate mail for the message he's so actively delivering. "I get a lot of not-so-nice letters about how this is wrong and misguided," he sighs. "I do wish those people well. Frankly, if someone decides to enroll in an MBA program, I hope it turns out well. But there is a much better, faster, more efficient way for these students to do what they want to do. The world would be a heck of a lot better if those people taught themselves what they need to know and then just went out and did it. It's the waste and inefficiency that really gets to me."